Darling banks on offshoring to save UK plc

Budget 09 Chancellor of the Exchequer Alistair Darling presents his budget today as the UK faces its worse recession for a generation. And his big idea is using offshoring and shared services to cut billions of pounds, and thousands of jobs, from the civil service.

The Operational Efficiency Programme promises to cut £15bn from budgets - and IT budgets are expected to provide more than half of these savings. The government has already had some apparent success in cutting costs via the Gershon review.

The OEP looked at five areas - back office and IT were examined by Martin Read - ex-boss of Logica, collaborative procurement by Martin Jay, asset management and sales by Gerry Grimstone and property by Lord Carter of Coles. Local incentives and empowerment were looked at by Sir Michael Bichard.

The group found potential savings, by 2013-2014, of £4bn in back office operations and £3.2bn in other IT costs. Another £1.6bn could be saved by group buying of IT kit.

The OEP calls for all public bodies with more than 250 staff to collect and publish value for money indicators for back office functions. They should review this performance before 2010 and start moves towards shared services.

Of course the government has tried shared services before, with patchy results. The Department of Transport's attempt to unify HR and payroll systems for six departments' ended up costing £81m and only saving £57m. The system famously gave error messages in German.

Sir Edward Leigh said the project was implemented: "with stupendous incompetence. This is one of the worst cases of project management seen by this Committee".

IT spending should be properly integrated into other departmental spending plans. CIOs should take responsibility for increasing standardisation and simplification across government in terms of infrastructure and applications.

More use of e-procurement schemes will help increase collaborative buying across departments.

All of this makes sense of course - but it is the government's ability to achieve any of these things that remains in doubt. Time after time they almost wilfully ignore even the most basic lessons of IT procurement.

In other news, the International Monetary Fund last night withdrew its estimate of how much Britain will pay to bail out banks. The fund reduced an estimate of £180bn to £130bn after Treasury complaints - still more than twice what Darling reckons the bailout will cost us. The IMF estimates global losses at $4 trillion. ®